Fashion retailer H&M has warned investors that sales are likely to fall again this year.

The Swedish firm, the second biggest retailer in Europe after Zara owner Inditex, admitted it had 'a tough start' to the year as a high volume of stock left over from previous seasons forced it to offer heavy discounts.

UK sales of clothes slumped 5 per cent in the three months to November 30, sending profits for the year tumbling 34 per cent to £442million.

Yesterday, H&M said its plan to invest more in online sales and new businesses, such as H&M Home and Cos, should help generate a 'somewhat better result' in future.

A spokesman added: 'The shift from physical stores to online is expected to continue.

'The physical stores are expected to return to comparable positive sales development from 2019 onwards, and with considerably lower price markdowns relative to sales compared with 2017.